Interest – What else are you entitled to for late payment of commercial debts?
In the autumn 2012 Dispute Resolution Briefing we advised on adding statutory interest to late payment of commercial debts. Amendments implemented earlier this year allow businesses to add the reasonable costs of recovering the debt, in addition to the interest and compensation. They also add more flexibility with regards to the start date for interest.
For contracts made after 16 March 2013 you are now entitled to add the reasonable costs of recovering the debt so far as they exceed the fixed compensation discussed in the previous briefing. The new amendments suggest that the reasonable costs could include internal costs, as well as the cost of instructing a debt collection agency or solicitor, even in cases that settle in response to an initial letter without litigation.
If you have multiple invoices relating to a separate order for goods and services then you are entitled to claim interest and compensation on each overdue invoice.
In relation to the start date for interest, where parties have not fixed a date for repayment, interest begins to run 30 days after the latest of: receiving the invoice or receiving the goods. A longer period can be agreed between parties. Where a repayment date has been fixed, interest remains to run the day after payment is due.
You therefore have the ability to control when interest starts to run by agreeing an early payment date with the other party or you can delay the start of interest, up to a point, by agreeing a late payment date or adding an acceptance procedure.
In light of the fact that you can claim the reasonable costs of recovering the debt, the initial cost of enlisting debt recovery solicitors can essentially be added to the debt.